The Economist: Malaysia Plays Catch Up

Malaysia is good at starting something but lack the will and impetus to follow through, a management sickness faced by many GLCs.

January 23rd 2014| 

Malaysia's new automotive policy aims to prepare the market for trade liberalisation, while easing the pain for its local carmakers.

In the second half of January, Malaysia's government unveiled the long-awaited revisions to its National Automotive Policy (NAP). The changes are designed to prepare domestic automakers for the imminent creation of the ten-member Asian Economic Community (AEC) and to carve out a role for the country in the regional automotive industry. However, the NAP 2014 also extends some of the protectionist measures that shield Malaysia's two indigenous manufacturers, Proton and Perodua, from international competition.

The most positive aspects of the new NAP 2014 aim to boost inward foreign investment by promoting Malaysia as a future hub for energy-efficient vehicles in the AEC. The new document broadens the definition of a green car, which is no longer tied either to a specific technology, such as petrol-electric hybrids or plug-in electric vehicles, or to engine size. The government will now start issuing licences to foreign producers to make small, energy efficient vehicles in Malaysia, hoping that such vehicles will also be exported elsewhere in the region.

The policy includes incentives and direct financing measuring M$2bn (US$600m). The ultimate goal is to boost exports of green vehicles to at least 200,000 units by 2020, with exports of automotive components reaching M$10bn at the same time. Instead of trying to compete in the mass car market, therefore, the Malaysian government is aiming to develop a market niche that could become a key driver of the automotive industry in coming years.

Yet Malaysia will face stiff regional competition even within this niche. Indonesia also has its low-cost green car programme, which is helping to attract foreign investment into the sector. Thailand has an eco-car programme, which aims to turn the country's into the ASEAN region’s main production hub for small, fuel-efficient city cars. It is also targeting green-car exports to countries outside the ASEAN trade block.

These two countries already outgun Malaysia in terms of both auto production and car exports. Thailand's policy of market liberalization has attracted investment from Japanese manufacturers and parts suppliers, which have built factories there over the past decade and a half. Vehicle production in Thailand is now around 2.5m a year, while Indonesia's output has reached 1.2m. Both those countries have also emerged as major regional vehicle exporters. Malaysia, meanwhile, produces fewer than 600,000 vehicles a year, with exports low.

History lessons

Part of the blame for this lies with Malaysia’s comparatively small market size and lower population. But part of the problem lies with its government's ambivalent attitude towards international trade in the auto industry. Malaysia's car industry was the brainchild of long-serving Prime Minister Dr. Mahathir Mohamad, who established Proton in the early 1980s, producing vehicles designed by Mitsubishi (Japan). The second car company, Perodua, emerged a decade later. The original NAP was published in 2006 with a goal of tilting the playing field in favour of domestic carmakers within a framework of controlled industry liberalisation. The first revision to the NAP was effected in 2009.

Initially, protectionist policies benefited the country’s automakers, making Malaysia a regional automotive leader in the 1990s. Without competition and trade opportunities to push the companies' development, however, the quality and technological sophistication of their vehicles suffered. Proton saw its market share drop sharply once it shifted to making proprietary vehicles. Perodua, in which Japan's Daihatsu owns a 20% stake, has been the market leader for over a decade, even though its vehicles are not competitive in international markets either.

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Lowering Car Prices: Killing The Myth

Hantu Laut

Lowering car prices.

Another one of Anwar and Pakatan's hollow propaganda to fool the people.

After I posted my article "Reducing Oil Prices: Anwar On The Stump, Stumping The Idiots",  a regular commentator of this blog by pseudonym SM challenged me to not only expose our fuel prices being one of the lowest in the world and lowest in the region, but to also provide analysis and comparison of car prices with other countries in the region. 

SM, is also a diehard supporter of Anwar Ibrahim and Pakatan Rakyat. Like most Malaysians he thinks our car prices are highest in the world. 

Well, SM,  you are in for a big surprise, I will lay down facts and figures to show that was not the case. Our car prices are one of the lowest in the region. 

I am talking about cars for the working class, not luxury cars craved by the wealthy, which in spite of the high prices are selling very well in this country. 

The streets of Kuala Lumpur, other towns and cities are littered with posh cars of all luxury brands. A clear sign that there are more than enough people with more than enough money to buy them. 

In Malaysia, cars are still seen as status symbol, particularly, among the Chinese community, a reflection of their success in business or in their profession. Though considered expensive by Western standard these luxury cars are selling very well in Malaysia and more often than not they be owned by Chinese business people.

It is not surprising that Anwar and other PKR leaders the likes of Rafizi Ramli and Azmin Ali tried to delude the people by blaming wrong government policy for the high prices of cars, which is completely untrue,  pure fiction and propaganda to fool unthinking Malaysians.

Below is the price of  a popular Japanese model in the Asean region.

Price of Toyota Vios 1.5 c.c

Malaysia - RM71,105. = US$23,389.00

Indonesia - Rp221,950,000. = US$22,833.00

Philippine - P869,000. = US$21,003.00

Thailand - THB559,000. = US$19,302.00

Singapore - $109,988. = US$88,864.00

Looking at the prices above are we much more expensive than our neighbours?

Malaysian made cars are even cheaper than the above foreign made model. 

The cheapest in the market of a compact 4-door sedan is the Proton Saga 1.3 c.c. costing around US$11,479.00. Another popular model the Perodua MYVI is selling around US$14,456.00.

Unless, you want to bring the "one-lakh" car from India to this country which is just a basic body with an engine and four wheels, which is not likely to fit the Malaysian more sophisticated taste, the current prices for the type of cars available here are already almost floor level. 

Ask Anwar and Rafizi how much lower can they go?

You probably can reduce by another 20% by removing all standard accessories that comes with it, which means no power windows, no power steering, no CD player, no sporty wheels, no cruise control, no electronically controlled side view mirrors and many more nonessentials. 

Can you sell such basic cars in this market?

The current government policy of keeping car prices cheap for the proletariat and higher prices for luxury cars is the correct policy. It's a caring policy for the economically disadvantaged. 

Our car prices are already lowest in the region. 

Unfortunately, most Malaysians do not bother to check the facts and prefer to eat the opposition's wholesome lies, hook, line and sinker.

PKR "turunkan harga kereta" A False Promise

Hantu Laut

From the sublime to the ridiculous. PKR's "turunkan harga kereta" campaign is a hyperbole.

PKR promise, here, of cheaper cars for Malaysians is a desperate attempt to fish for votes. The proposal is ridiculous, impractical and will have serious repercussions if not implemented gradually. This is just another empty promise that they knew could not be implemented due to economic repercussion.

We don't need more cars on our already congested roads. Reducing the price of cars drastically will have serious repercussion on the second-hand car market which may have to close down their businesses as no one would want to buy second-hand car if price of new car is cheaper.

Though, I agree the prices of cars in this country are much higher than many other countries, including developed countries, it makes more sense to first liberalise the importation of cars by gradually reducing the current AP and to finally abolish the practice completely. Anyone, including individuals who can afford to buy directly, be allowed to import their own car by applying for a simple permit from the government at a reasonable fee. 

The government can charge fee based on cubic capacity of the engine. The bigger the engine the higher the fee. The reduction in import duties should be gradual and must be done over extended period.

The present system of issuing APs to selected companies do not benefit the government as there are no revenue collected by the government. The AP have made selected Malays/bumiputras very rich and lazy.Most of the businesses end up in Chinaman's hand who make even more money. 

Most cars imported under APs are refurbished second-hand cars and under declared by importers to reduce payment of import duty. Here again, the government lost substantial amount of revenue.

I was made to understand some AP are sold as much as RM30,000.00 each. The lucky bumiputra needs only 100 APs and he can collect a cool RM3.0 million for doing fuck all. If Pakatan is serious about stamping out corruptions this is one of the many things they should abolish.

They should not be any love lost with Proton or false belief of national car and national pride.If it can't make money, sell it off, or close it down.Malaysians should not be made to pay to support this losing industry. 

The British have lost most, if not all, of its pioneering car industry, closed down or sold off to foreign interests. British Leyland, the biggest car manufacturer decades ago has ceased to exist. 

The old Malay adage "biar mati anak jangan mati adat" is not relevant in a business world. Both Proton and MAS should be considered for closure or divest to other interested party.

Of highest priority, is not price reduction of new cars, but improving the public transportation in the country.Malaysia has one of the worst public transportation system in urban and semi-urban areas. This anomaly has been neglected for decades. While our neighbours have commissioned mass transit for many years now, Malaysia is still lumbering over a system for its capital city. The project has also been met by oppositions from landowners instigated by opposition parties. 

In Singapore, no private landowners dare to protest against any project of public interest or public purposes and the government has a tough land acquisition law to deal with such opposition. There was no political sabotage of its MRT project as what we see happening in Kuala Lumpur. 

Taxis in Malaysia are one of the worst in the world. Try catch a cab during peak hours in Kuala Lumpur, if that is not bad enough, dealing with ill-mannered driver would make your blood reach boiling point. Taxis in major towns in Malaysia are old junks, uncomfortable, badly maintained and dangerous. 

Just last week the government announced the increase in maximum age of taxis from 15 to 18 years, that it says would make many taxi drivers happy. What about safety of passengers, are this no concern of the government? The government also give away free tyres to qualified taxis.

All these ad hoc handouts are pre-elections goodies that serve the public no benefit at all.

If the government is serious about improving public transport and bring down the cost of taxi fares that would bring a win-win situation for both taxi drivers and the travelling public, it must first make acquisition of vehicle for use as taxi as cheap as possible.

Remove all duties on this type of vehicle and restrict its use. The car can only be sold as a taxi and must be scrapped after 15 years. Subsidy on fuel and tyres should also be considered. 

When fares are cheap more people will use taxis and for the taxi driver, it's economies of scale, the bigger the volume the more he makes.

Taking cheap public transport is a better choice than buying a car. The lower and middle income group will have more money in their pockets to spend on other necessities.

The 50 Worst Cars of All Time

Bettmann / Corbis

1899-2007

The 50 Worst Cars of All Time

On the 50th anniversary of the Ford Edsel, TIME and Dan Neil, Pulitzer Prize-winning automotive critic and syndicated columnist for the Los Angeles Times, look at the greatest lemons of the automotive industry

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